Value at Risk, 3rd Ed. the New Benchmark for Managing Financial Risk - pdf 23

Free download ebook Value at Risk, 3rd Ed. the New Benchmark for Managing Financial Risk
CONTENTS
Preface vii
Acknowledgments____xvii
Part I. MOTIVATION 1
1 The Need for Risk Management 3
2 Lessons from Financial Disasters 31
3 VAR-Based Regulatory Capital 49
Part II. BUILDING BLOCKS 73
4 Tools for Measuring Risk 75
5 Computing VAR 105
6 Backtesting VAR 139
7 Portfolio Risk: Analytical Methods 159
8 Multivariate Models 189
9 Forecasting Risk and Coưelations 219
Part III, VALUE-AT-RISK SYSTEMS 245
10 VAR Methods 247

11 VAR Mapping 277
12 Monte Carlo Methods 307
13 Liquidity Risk 333
14 Stress Testing 357

vi
Contents
Part IV. APPLICATIONS OF RISK MANAGEMENT SYSTEMS 377
15 Using VAR to Measure and Control Risk 16 Using VAR for Active Risk Management 17 VAR and Risk Budgeting in Investment Management 379 403 425
Part V. EXTENSIONS OF RISK MANAGEMENT SYSTEMS 451
18 Credit Risk Management 19 Operational Risk Management 20 Integrated Risk Management 453 491 515
Part VI. THE RISK MANAGEMENT PROFESSION 535
21 Risk Management Guidelines and Pitfalls 22 Conclusions 537 565
References 573
All of life is the management of risk, not its elimination.

—Walter Wriston, former chairman of Citicorp

^Corporations are in the business of managing risks. The most adept ones succeed; others fail. Whereas some firms accept risks passively, others attempt to create a competitive advantage by judicious exposure to risks. In both cases, however, the risks should be monitored carefully because of their potential for damage.

This chapter motivates the need for careful management of financial risks. Section 1.1 describes the types of risks facing corporations and argues that financial risks have increased sharply over the last 30 years. The need to hedge against these risks had led to the exponential growth of derivatives markets, which are described in Section lể2. Derivatives are very efficient instruments to hedge against, or speculate on, financial risks. Used without proper controls, however, they have the potential for creating large losses. Thus they should be used only with good risk management. Section 1.3 explains the evolution of risk management tools, which has led to the widespread use of value at risk (VAR) as a summary measure of market risk. Finally, the various types of financial risks are discussed in Section 1.4.

1.1 FINANCIAL RISKS

What exactly is risk? Risk can be defined as the volatility of unexpected outcomes, which can represent die value of assets, equity, or earnings. Firms arc exposed to various types of risks, which can be classified broadly into




https://mega.co.nz/#!EFtkgAIQ!2EapHvMyM ... q5mCc4OyFU
Music ♫

Copyright: Tài liệu đại học © DMCA.com Protection Status